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July 30, 2007

Loser-Pays in Alaska: The Way It Should Be

By Rep. John Harris

Alaska is well known for being unique. Even in the state's court system, Alaska has demonstrated a break from the Lower 48 by early on adopting a "loser pays" system for attorneys' fees as a check and balance against unnecessary litigation. In a nutshell, the "loser pays" system says if you sue someone and you don't win, you must pay a portion of the winner's attorney fees incurred in fighting your lawsuit.

The idea is to allow the person who got sued to recover some of the costs in defending the litigation. The concept is to create a consequence from filing lawsuits and to make people think twice before filing a frivolous lawsuit. Of course, the person sued never fully recovers his or her costs, but the "loser pays" system is believed to reduce the number of frivolous lawsuits that Alaskans and Alaska companies must defend.

Like so many things that work really well, the government, through the Alaska Supreme Court, tried to fix something that was not broken and created an exemption from the "loser pays" system for individuals who brought litigation on the "public's behalf." At the time the court created it, the exemption sounded noble.

With time, however, this exemption created a cottage industry for Outside environmental groups to sue anyone trying to build something in Alaska without having to worry about the consequences of losing. For example, the exemption the court created meant that if an environmental group sued to stop a development and lost, it did not have to pay the costs incurred by the other side. And, by the way, if the group won on any part of its lawsuit—no matter how small or technical—it would be reimbursed 100 percent of its attorneys fees.

This is what happened recently in the predator control case in Palmer. In this case, the judge actually ruled against an Outside animal rights group and held that the Alaska Department of Fish and Game had the authority to operate a predator control program in Alaska. Nevertheless, the judge also ruled that the Board of Game had made a technical mistake in adopting the regulations and that it needed to go back and adopt new regulations. This effectively denied the Outside group its entire case. But, because there was a technical glitch in the adoption of the regulations, the state had to pay the attorneys fees for the animal rights group. That means Alaskans paid $95,000 for the Connecticut-based group's attorney fees even though it really lost its case.

Former Commissioner of Fish and Game McKie Campbell described it this way: "The ruling is a minor setback. The judge ruled in favor of the state on virtually all of the arguments made by the plaintiffs. The programs have been invalidated based upon the judge's finding that the Board of Game's regulations are 'internally inconsistent.' The state can make its regulations consistent." And yet Alaska still had to pay the Outside group's attorney fees.

And it isn't just wildlife management. Outside interests began abusing the "loser pays" exception to delay mining timber and oil and gas development. Outside interests suing on behalf of the Alaska public?

Thankfully, after years of efforts to rein in the exception to "loser pays," the Legislature in 2003 passed House Bill 145, introduced by then-Gov. Frank Murkowski, and returned the state to the common sense approach that Alaskans had created years ago.

But of course the story doesn't end there. Three Alaska environmental groups along with others sued to stop the law. The Juneau Superior Court overturned the law, holding that the legislation changed a court rule of procedure and needed a two-thirds majority vote instead of the normal simple majority which it had not received.

On April 20, after almost four years, the Alaska Supreme Court upheld House Bill 145, which levels the playing field in the award of attorneys fees in lawsuits by reinstituting the "loser pays" system for everyone.

This was a major win for the state and for private individuals and companies trying to create jobs and develop Alaska's natural resources. All most people ask for is a level playing field. Now when a nonprofit environmental law firm sues an Alaskan it's treated the same way the Alaskan would be treated if he or she sued the nonprofit environmental law firm. You lose; you pay. Isn't that the way it should be?

Rep. John Harris, R-Valdez, is speaker of the state House of Representatives.

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Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.